Bank of England's Prudential Regulation Authority, which supervises financial institutions at the level of the individual firm, notified the banks that it "stands ready to consider use of our supervisory powers should your group not agree to take such action."

Although the PRA had clearly stated that the outstanding payments would extend to include "no cash bonuses to senior staff," the banks' statements did not reflect that they had agreed to this specific demand.

Bank of England's drive to extend payment cuts to senior managers follows a similar move by the European Banking Authority. The regulator asked banks to arrange for payments, and especially bonuses, at a "conservative level."

It was also emphasized by the EBA that capital relief arising from measures adopted in response to the Covid-19 crisis are meant to finance the corporate and household sectors, not to increase dividends or make share buybacks to remunerate shareholders.

The five biggest banks had expected to pay £7.5 billion ($9.3 billion) in dividends over the next two months, according to Bloomberg.

"The big question following £7.5 billion ($9.3 billion) of dividend cuts by the UK's largest banks is what are they going to do with the money?" said Kevin Doran, a financial analyst at AJ Bell, in a morning note. "Now would be the ideal time to repay the British public for the bailout the banks received during the Financial Crisis by writing of debt repayments for a period of time for those most affected by the Covid-19 crisis."

The British banks have avoided any penalties or formal action by agreeing to the financial regulator's demands.

"Clearly we are in extraordinary times, and the banks had little choice but to comply with the wishes of the UK's regulators," said Adrian Lowcock, head of personal investing at Willis Owen, in a note. "Nonetheless this is another hit to investors already reeling from the losses being seen across markets," he said.

According to Bloomberg, HSBC shares plunged as much as 10% in London trading and were down 8.4% at 11 a.m. London time on Wednesday. Standard Chartered Plc fell 7%, Barclays Plc declined as much as 8.4%, Lloyds Banking Group fell as much as 8.8%, and RBS was down 6.4%.